Dollar lower due to expectations on rates of pound and yen
2023.01.24 14:34
Dollar lower due to expectations on rates of pound and yen
By Kristina Sobol
Budrigannews.com – As economic data from Japan and the United Kingdom bolstered the case for additional interest rate hikes there, the dollar tested a new nine-month low in early trade on Tuesday in Europe.
The, which tracks the dollar against a basket of currencies from advanced economies, was down 0.4% at 101.513 at 02:55 ET (07:55 GMT), having reversed a slight increase overnight as stronger-than-expected numbers increased pressure on the Bank of Japan to abandon its policy of yield curve control.
Instead of remaining at the expected 2.9%, inflation in Japan increased to 3.1% in December, its highest level in over three decades. Separately, former colleagues criticized BoJ Governor Haruhiko Kuroda, one of whom told the newspaper Nikkei that by allowing the yen to weaken so much, he was “making fools” of the Japanese public. Last week, Kuroda insisted that the bank’s decision to maintain the current policy settings at its most recent meeting was correct.
However, as rumors of a tighter BoJ policy grew, the gained another 0.6% to 129.81. Most analysts anticipate that the new Governor will take a different approach when Kuroda leaves office in March.
In the meantime, after new data revealed a surge in government borrowing in December, the also increased in Europe due to the rising cost of keeping energy bills for homes and businesses under control.
Subsidy payments and an increase in the cost of servicing the -linked debt were the primary factors that contributed to the increase in the public sector’s net borrowing requirement, which was £26.58 billion, or roughly £4 billion more than anticipated. The highest monthly interest bill since records began was £17.3 billion for the nation.
Traders placed bets that the UK would need to maintain its current rate of interest rate increases in order to bring inflation down, which resulted in the pound rising by 0.3 percent to $1.2406.
The rest of the day’s economic calendar is likely to be dominated by S&P Global’s across Europe, where the question of whether the Eurozone economy was able to avoid contraction at the beginning of the year will be the primary focus.
The expectation that a recession, if it does occur, will be brief and shallow rather than the deep contraction that appeared likely a year ago when Russia invaded Ukraine has been strengthened by mild weather and falling gas prices.
According to GfK, German growth in January was lower than anticipated for the fourth consecutive month— partially as a result of those developments with gas prices. At $1.0890, the was up 0.2 percent.
As the dollar strengthened elsewhere, new highs were maintained. Gold was at 1942.85 an ounce by 02:55 ET, up 0.7% for the day.
